A New Era of Responsible Banking

Laurie Dufays is Deputy Director of WSBI (World Savings Banks Institute) This summer I stayed at an old chateau and vineyard in Bordeaux. Steeped in family tradition, the owners make fine wine using organic ingredients and environmentally friendly methods. A neighbouring spa also uses the vineyard’s grapes to develop cosmetic products free of toxic ingredients.Now you might call it a bit of a stretch to link wine and cosmetics to retail banking. But on that idyllic setting of chateau, vineyard and spa, I was surrounded by entrepreneurs hyper-conscious of their responsibilities to the customer, the environment and the community in which they live and work. On top of all that, they are making money – as a business must. Their wealth, though not ostentatious, is apparent, and it’s easy to see why: they make the customer feel respected and well looked after.The notion of conducting business responsibly is cropping up everywhere, you see, and customers are both taking note and driving it. How can this apply to banks? They’ve had quite a hard time in recent years, of course, but every cloud has a silver lining. While confidence in them has plummeted, banks are restructuring and their customers are talking. Loudly. They want to deal differently with their banks, and they want banks to go back to their roots, by doing what they were created to do: finance the real economy.A power company lights up your house and an internet service provider links you to the web – functions that serve everyone’s daily needs. Couldn’t banks act like a utility company, hooking you up to the financial system and making it easy for you to use it? It’s not all about you, of course: customers also expect banks to show a real and true commitment to the economy and society as a whole.So banks have to adapt. Over the past five years we’ve seen the rise of mass retail banks that aim to be sustainable and socially responsible. More recently, they have promoted their concern for environment, governance and social issues and relabelled their mission “ESG banking”. But this label was but a band-aid for the banks’ collective reputation, and it was ripped off by the news of banks exposing their customers’ savings to the risk of crushing government debt. This, to put it lightly, made customers question the validity of ESG banking.Shouldn’t banks rethink their activity and integrate responsible values at every single step, not only vis-à-vis the environment, governance and social affairs, but also the whole range of banking? Of course, they must be profitable, too, and like the old chateau and its wine producers, they will be as long as they respect and look after the customer.What is it, then, to be responsible? What does it entail? How far can a bank go? What methods can a bank use to put the customer and community first? In other words, how can banks take a more holistic approach and offer an economically effective, environmentally and socially friendly line of products and services free of toxic ingredients?* La WSBI (World Savings Bank Institute) es organizador del Master en Banca Responsable junto con el IEB y en colaboración con la LSE (London School of Economics)